Lee
Agree with the first - not the second. You've only to look at your account to know that you've lost the use of the money whether or not you've "formally" closed the thing out.
The trouble with adding to losing positions - assuming the rationale for the trade is no longer there - is that it seems to work. Except for the occasion - and you only need one - when it doesn't and your losses accelerate at the increased rate until you cry uncle and view with horror the remnants of your account.
Far better, imo, to be out and enter again further down (up) with a "new" trade when and if your methodology indicates you should do so.
jon
Hello Jon,
Hope you had a great weekend.
Although I (in part) agree with you not agreeing with me - does that make sense.
My trading style would need to be looked at further for it to be understood so i'll post a little here to see if it makes sense.
As a long term trader I understand fully that I will rarely get the entry right - just as a scalper or day trader may be off by a few points or minutes, a longer term trader can be off by a few hundred points or days/weeks - hedge funds, managed accounts etc, in other words I have an overbought level on dax (for example) of 7500. So....At this level I will enter....But.....Understanding that I will rarely pick the tops (or bottoms) will chip in and out of trades. This also helps with orders being executed instantly with no messing around with fills. So.....I plan to trade up and down catching ranges of 100pts. Therefore I put a limit on at 7800 for a final stop (although this can be adjusted up or down depending on other relevant factors)
So the plan would be: Short dax at 7500 and short further at intervals at 7600, 7700 and finally 7800. Again on the way down or retracements and even if the final contract does not pay out, the range in most cases over the period of the trades will in most cases be paid for by the highest one. The markets always have retracements/pullbacks of some kind including resistance/support areas. The markets will also range/consolidate more than trend at a rate of many times.
This is farely obvious as the major indices have ranged between (FTSE 100 EXAMPLE) 3500 and 6800 over the last 14 odd years. The mean would be 5150. Over the last decade should you have sold above this level and bought below you would have always made money on EVERY contract - less comms/roll over charges but these are and should be minimal depending on your broker. The range trades would have certainly of paid for these costs.
I now hear people screaming and shouting - If its that easy why haven't you done it. The answer is I have. I also still hear people doubting this cannot be true or simply that easy. I say why not. The charts and info are all there for you and I to see. It really is that easy but as people we deviate and become fearful or greedy. My advice is switch off CNBC and Bloomberg and any other medium, use your head and keep it free from clutter.
I wont go into the exact money management here and amount that goes into these particular trades but I shall provide an example:
At 7500 I enter with £25pp - Maximum loss would be a matter of 300pts or £7.5k
At 7600 I enter with £50pp - Maximum loss would be a matter of 200pts or £10k
At 7700 I enter with £100pp - Maximum loss would be a matter of 100pts or £10k
At 7800 I enter with £200pp - Maximum loss would be a matter of 10-20pts or £2k to £4k
Also: I may only get 1 or 2 opportunities a year for these swings and those particular groups of trades may last several months chipping in and out.
The gain in the opposite direction and bear in mind that big gains can become big losses or what goes up will go down etc. The top side is that should the upper level be breached then many thousands would be made to the tune of £20k for the last deal to retrace by 100pts. This amount within itself is enough to right down trade 1, 2 and 3 by 70%. If it retraces to trade 3 then the deal would be in profit and the other 2 would not need to come true and could be closed for a loss, the net would be a gain on the whole trade and over the time period.
NOTE: Ignore the 'big' figures that most on here will either bulk at or disbelieve. This can be scaled down or up depending on the account size and is displayed as an example only.
Things this post hasn't gone into is the actual percentages and including the money management for which is absolute key. It also does not touch on the aspect of dax ratio, trends, retracement values etc - Although most who trade dax on a long time frame will be familiar with its typical MA on a day, week, month and year.
Before criticism becomes a problem I will state now that my trading style has attributes of(but is not exclusive or limited to) flick a coin theory, Double up and averaging. It is also backed up and complimented by TA and FA.
Everyone has their own styles for which I have learnt to respect them all, even Spanish 89 style that for some will remember. Crazy blow up high risk style but yet he ended up taking money from the markets - at the end of the day thats what its all about. By no means is mine any more complicated than the next, quite the contrary and is a very simple and easy way of trading. I have many sheets and tools that I have had developed throughout the years that do the sums. I just put in the figures and if it stacks up then I play the game win or lose, the outcome is then up to me and the other players.
NOTE: That last statement is not me controlling the market but instead, controlling my trades.
PS: How I trade goes against all the basic principles and here is some on the list:
Do not add to a losing trade - Contradicted as most pro traders and funds managers will keep buying up the market
Keep your losses small - again contradicted by the above
Do not double up - again as above..... and so.
In this game we will find much that actually contradicts what the pro's say but yet not necessarily what they do. It goes along the lines of do as I say and not what I do. Is this how they make their money???? I'll leave that one with you.
PS: I think I need to shorten my posts. No one reads posts on here if they go over 2 sentences.
Have a good week,
Lee Shepherd
